Speaking at the All-Stage Conference in July, Gao emphasized that founders—especially those aiming for a Series C raise—must start with a harsh reality check. Only one in five startups that close a Series A successfully reach Series C, and over the past year, the bar for late-stage funding has only climbed higher.
“In the past, many investors blindly chased momentum,” Gao explained. “That era is gone. Now they’re asking: Is this company truly destined to dominate its market? The question isn’t just Are you growing?—it’s Is your trajectory toward market leadership undeniable?”
Criteria for Winning Series C Funding
Gao outlined key expectations:
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Category Leadership: Companies must not just participate in their market but define it. They need clear, undeniable traction that proves they’re on track to become the leading player.
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Metrics Alone Don’t Close Deals: Strong revenue growth, retention, and profitability matter, but they won’t seal the deal unless investors are convinced the startup will ultimately dominate its niche.
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Vision Sells: Gao cited a startup that, despite unremarkable metrics, raised a Series C at a valuation exceeding $2 billion simply because it convincingly told the story of its future industry dominance.
Sustainable Growth > Flashy Gains
In today’s AI-fueled market, startups can scale at blistering speeds, but Gao warned: “What skyrockets often crashes just as fast. The real test is sustainability.”
Investors now look for “compounding loops”—flywheel effects that strengthen over time:
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Does each new customer make the product inherently better?
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Does the cost of acquiring customers (CAC) decrease as you grow?
If the answer is yes, investors lean in. If not, even stellar metrics won’t save you.
Fundraising Is a Market Campaign
Founders should treat fundraising like a go-to-market effort:
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Build Relationships Early: Sapphire Ventures, for example, usually invests at Series B but often knows target companies for a year or more before committing.
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Track Investor Interactions: Maintain a lightweight CRM for investors, noting partner names, past investments, and preferences.
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Nurture the Loop: Send periodic updates to keep potential investors engaged well before you officially start raising.
Timing Is Everything
Perhaps Gao’s most critical advice: Don’t enter a Series C raise unless multiple firms have already signaled interest.
“The worst mistake is misjudging the market and launching too early,” she said. “At this stage, success isn’t about luck or just waiting for a ‘yes.’ It’s about precision timing and long-range planning.”
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